European refining sector needs further closures

Europe's refining businesses must slim down further and then pump billions of dollars into what remains, according to the head of European refining trade group Europia.

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By CASSIE WERBER

BRUSSELS -- Europe's oil-refining businesses will have to slim
down further and then pump billions of dollars into what
remains, the head of one of Europe's leading oil trade
associations said Thursday.

Michel Benezit, president of Europia, a trade
association for Europe's refiners, presenting a grim outlook
for refining in the region, said $21 billion will need to be
spent on investment in the continent's refineries and that
retaining sufficient refining capacity was key to Europe's
energy security.

Since 2008, some 15 European refineries have
closed, representing 8% of the continent's capacity. The
industry is hobbled by having too many plants set up to refine
gasoline and not enough to refine diesel, a technical mismatch
with demand that is hard to rectify. Meanwhile, appetite for
refined products overall is waning.

Speaking at the Platts European Refining Markets Conference, a
meeting of Europe's refiners held each year in
Brussels, Mr. Benezit said close attention needs to be paid to
industry dynamics and warned against losing the ability to
refine in Europe.

"We all know that demand for refined products
has declined," he said. Gasoline demand has fallen 17% over the
past five years alone, according to Europia's figures.

How many more closures will be required "is
anybody's guess" but more than 2% of existing capacity would
have to go, Mr. Benezit said.

What remains of the refining sector will need huge
investment to deal with efficiency requirements and concentrate
on valuable products, he said. At least $21 billion will need
to be pumped into the industry by 2020, on top of the nearly
$30 billion that has been spent in the last five years.

These combined amounts represent about $1 of
capital expenditure for every barrel processed, in an environment where the refining
margin -- or profitability -- is typically about $1-$5/bbl.

This week's US oil data from the Energy
Information Administration showed that refineries on the US
Gulf coast are running at near full tilt, suggesting that
refiners there will continue exporting products to Europe. The
US, which used to import much of the gasoline it consumed, is
now meeting many of its domestic needs by refining oil derived
from shale. The US oil boom increases the likelihood of a
sustained period of high product availability that could crush
margins for all refiners in Europe, according to analysts at
JBC Energy.

The development of refining outside Europe in places
like the Middle East and China has also introduced competition.
These "unequal environment policies" have lower environmental requirements to
Europe, Mr. Benezit said Thursday.

Increasing legislation in Europe and the loss of key markets
such as the US are also squeezing the industry, he said, along
with the development of more fuel-efficient cars.

Dow Jones Newswires

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I think that chinese people will not produce poluting cars for them selves, in a very short of time. they will step head and still floodding our lag.. Anyhow, we have to keep some jobs alives..at any cost. They are the one producing..this why we are the one struggling, isn it??